AAPL: Bulls Rush to Defend Against WSJ, Nikkei iPhone Reports

By Tiernan Ray

Shares of Apple (AAPL) today closed down $18.55, or almost 3.6%, at $501.75, after slipping as low as $498.51 at one point, following reports yesterday the company has cut component orders for the iPhone 5 amidst weaker-than-expected demand for the device.

The Wall Street Journal’s Juro Osawalate yesterday reported that orders of screens for the iPhone 5 “for the January-March quarter, for example, have dropped to roughly half of what the company had previously planned to order,” citing multiple unnamed sources.

There was also a report in Japan’s Nikkei News Service, which specifically mentioned Japan Display, LG Display (LPL), and Sharp reducing supply of LCD panels for the phone “significantly,” according to a summary provided by TheFlyontheWall. (Nikkei requires a subscription to read articles.)

The cuts, if true, and if they have anything to do with production, would appear to affect the fiscal Q2 ending in March, versus the fiscal Q1 that ended last month.

The bulls are out in force this morning, with many declaring the report “old news” following a spate of rumors in December arguing demand was off and orders were being cut.

UBS’s Steve Milunovich this morning reiterates a Buy rating and a $700 price target, writing that “The article says Apple notified suppliers of the cut last month, which is when we and most of the Street reported it.”

“Consequently, it appears this is old news—our analysts indicate no changes since.”

Milunovich still expects iPhone units of 45 million last quarter, 41 million this quarter, 36 million in the June quarter, and 33 million in the September quarter. His total for the iPhone 5, specifically, is 25 million to 30 million this quarter, and about 3 million to 5 million of the iPhone 4 and 4S models, combined.

J.P. Morgan‘s Mark Moskowitz likewise reiterates an Overweight rating and a $770 price target, writing that “In our view, this is just more noise around the supply chain as the order cuts have been discussed in media reports over the last few weeks and a topic we had discussed previously on December 19.”

Moskowitz reiterates an expectation for 48 million iPhones having been sold last quarter, and 45 million this quarter, adding “Even if we assume that Apple has cut iPhone 5 orders in half from the 65M that the Nikkei reported, it implies upside to our current estimates.”

Moskowitz goes so far as to write that order cuts may be a result of improving supply:

We believe the bigger message related to any potential order cuts could be that iPhone 5manufacturing yields and thereby gross margin are on the rebound. In our view, the potential order cuts are a direct result of manufacturing yields improving following the fast-and-furious product roll-outs of the iPhone 5 as well as new iPads and Macs. We had written previously that Apple had to absorb cost overage (due to poor yields) in the building of iPhone 5 and iPad mini. In our view, recent order cuts could suggest that the manufacturing yields are improving on the iPhone 5, and as aresult, this could be another reason that Apple pulled back on excess orders ofcertain components.

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There are 36 comments

JANUARY 14, 2013 1:08 P.M.

Beltway Greg wrote:

According to him that number they had planned to order was 65M. That's ridiculous. Apple never planned to order 65M. Truthfully, I'm not certain, after watching the video, that Osawa understands English well enough to comprehend what he's saying in its totality.

JANUARY 14, 2013 1:14 P.M.

SCOOCH ELLIOTT wrote:

THE ORDERS HAVE DROPPED IN HALF BECAUSE AAPL NOW HAS CHANGED THEIR PLANS. THEY ARE GOING TO START PRODUCING NEW IPHONES EVERY 4 MONTH'S INSTEAD OF EVERY YEAR. THEY ALREADY HAVE ENOUGH IPHONE 5'S IN STOCK. AAPL IS A STRONG BUY. There's no way that Apple only SOLD 21 million iPhones total. No way! They sold 5 million the first week it came out they sold 4 million in China the first week he came out and they got 53% of the 51 million Smart phones activated right after Christmas so that's another 28 million. Do the math 28+5+4 is 37 million phones sold!! Their is 5 ( five) more weeks in the quarter not figured in,also.AAPL WILL BLOW AWAY ESTIMATES

JANUARY 14, 2013 1:14 P.M.

Bao wrote:

When it comes to Apple stock, it doesn't matter if the report turns out to be bogus. The stock dives upon bad news, but doesn't recover when the news is found to be false. Remember that only 2 guys in Beijing were interested in buying the iPhone in mid December? It didn't help when the truth came out.

JANUARY 14, 2013 1:14 P.M.

Anonymous wrote:

Is this stock manipulation by WSJ and their hedge fund affiliates to get AAPL DOWN as far as possible just before earnings? Hello SEC!!!

JANUARY 14, 2013 1:15 P.M.

Randy Wilhelm wrote:

Though the decline has been severe (and the corporate news negative), Apple is in an amazing position to profit from two of the fastest trends in hardware technology.

Despite the recent depreciation in stock value, the company stands to clean up from two of the biggest trends in technology – tablets and smart phones. Data presented by Barron’s showed that smart phones have clobbered PC growth since 2008. Also, unit total and total value of smart phone sales eclipsed that for PCs for the first time last year.

There’s no doubt the “smart phone revolution” stemmed from Apple, which sold more than 39.9 million iPhones in 2010. Apple increased that amount to 72 million units in 2011 and nearly 125 million iPhones during 2012.

In addition to being the king of smart phones, Apple holds the crown in the tablet market – a segment that may overtake PCs soon. Though tablets arrived late to the party, 100 million of them shipped last year (PCs were below 400 million units). In fact, Apple alone has sold more than 100 million iPad tablet devices during the past two years.

Amazingly, Apple recorded $156 billion in sales last year. iPhone- and iPad-related products accounted for $112 billion of that total amount.

The future direction of smart phones and tablets is obvious. And Apple is one of the few companies in a position to profit from that expected growth. The stock may move lower or wiggle around $515 for another few weeks or months. However, the company is in too good a position and the shares are too cheap to stay this low for an extended period.

JANUARY 14, 2013 1:16 P.M.

ALEX DERRICK wrote:

Investors are waiting to see AAPL's numbers. If they beat the sky -high expectations ,( or the way overblown expectations of increasing earnings by another 50% ) then the stock will be up, up and away. It doesn't seem fair that after all the analysts price cuts and all the CNBC BASHERS that this company is still expected to go from $9.32 a share in earnings to $13.34 a share in earnings. Do they do this to GOOG? AMAZON? FFIV? CSCO? FB? NOPE! As long as these other tech companies make 12% more money, their shares just skyrocket, while their P.E.'S go up to 75 -3400. YES, AMZN HAS A P.E HIGHER THAN HEAVEN, but JEFF BEZOS buys with every dollar he has right after they announce earnings. AAPL stock is being manipulated by all the RICH , CROOKED WEALTHY PEOPLE AND journalists. They are trying to scare all investors into thinking AAPL IS NO LONGER A GREAT COMPANY. But we all know that AAPL has great growth now and for next 2-3 years just as they are.if they come out with new products, then the stock will head much higher. DON'T SELL YOUR AAPL STOCK ANYMORE. YOU PEOPLE MUST HAVE ROCKS FOR BRAINS. AAPL deserves to trade at a premium to the whole market...NOT a HUGE, HUGE DISCOUNT.AAPL'S PE IS freakin 10.

JANUARY 14, 2013 1:17 P.M.

RUTH ANN PARK wrote:

THESE ARE THE FACTS! AAPL SOLD 5 MILLION IPHONE FIVES IN THE FIRST WEEK. THEY SOLD 3 MILLION IN CHINA DURING THE FIRST WEEK. THEY SOLD AT LEAST 30 MILLION JUST DURING THE CHRISTMAS HOLIDAY. THATS 38 MILLION FOR SURE SOLD IN USA AND CHINA IN BASICALLY 6 WEEKS. THAT LEAVES 6 MORE WEEKS IN USA, CHINA , AND 98 MORE COUNTRIES. RIMM IS NO THREAT TO AAPL .AAPL IS IN DEMAND ALL OVER THE WORLD

JANUARY 14, 2013 1:19 P.M.

Butch Hose wrote:

AAPL is starting to produce the iPhone six and the iPhone seven, and the reduced price iPhone needed for underdeveloped nations. that's why they cut orders. That's the only reason why because their stores were jampacked and their sales are strong

JANUARY 14, 2013 1:20 P.M.

bobbobwhite wrote:

Other AAPL news has been announced, since the iPhone orders article this morning, that states that Verizon saw a big jump in iPhone sales in Q1. However, nothing is affecting AAPL price but the negatives. I wonder, why is that? Bad news, bring it down. Good news, forget about it.

Wall Street is the Wizard pulling the levers behind the curtain, as usual.

JANUARY 14, 2013 1:24 P.M.

Jake_in_Seoul wrote:

I fully expect most reports of Apple's FY 1st quarter results to avoid mentioning the crucial fact that the 1st quarter this year was one week shorter than that of last year.

It's hard not to believe that there are by now 1000s of people around the world whose career success depends on portraying Apple to the public in a negative light and encompassing a decline in the price per share of AAPL. Some of them, it seems, work at the WSJ.

Certainly in South Korea there are tech journalists who, at least to my knowledge, have never penned a single positive, unqualified sentence concerning Apple and likely will never do so. Upon reflection, the hostility many harbor against Apple and its products is truly bizarre.

JANUARY 14, 2013 1:36 P.M.

Anonymous wrote:

Sorry Apple, but you must die!

JANUARY 14, 2013 1:38 P.M.

Anonymous wrote:

Enjoy your lawsuit, asshole.

JANUARY 14, 2013 1:47 P.M.

anonymous wrote:

What a beauty of a thing.
These wall street people keep on defending it and keeps going down. Thgere are targets around like $50 and $360.

JANUARY 14, 2013 2:11 P.M.

mbmaheshwari wrote:

People commenting here are totally blinded by Apple..come to the fact, at 500 billion dollar apple is biggest company and it is there for a reason..but investor do not see any reason to go toward trillion dollar company. That was hype created in last few years. Apple is no where close. Current product are amazing but they are now me too product in market..There is Galaxy and so in market...till 2010 apple was far ahead of competition..no more..

JANUARY 14, 2013 2:19 P.M.

Will wrote:

Juro, hope your jail cell is comfortable.

JANUARY 14, 2013 2:22 P.M.

Anonymous wrote:

Everyone is in a rush to dump this crappy stock. Just the mention of some old news has investors cringing and hitting the sell button. Apple is a horrible investment for individuals. The hedge funds are running for the hills to buy some good stocks like Amazon, Netflix and more Amazon. You could pick almost any stock and get more gains than you'd get from Apple. Only the diehard fools are sticking with Apple. Wall Street is out to break individual long-term Apple shareholders. Not too many companies are making the kind of revenue and profits Apple is making and yet nobody wants to buy the stock. I think Tim Cook is the main problem. He's, well, kinda weak-kneed. He's the type of dude anyone can push around. He's got no real presence.

Run some old news or a new rumor and this stock will crumble like a sand castle in a stiff breeze. Apple might as well just go private because they're not doing anyone any good, especially shareholders. If it weren't for Samsung eating Apple's lunch, the company might have been able to sell 65 million iPhones if they could actually build that many, which is highly doubtful. Apple can't do anything right when it comes to manufacturing in large quantities. Samsung can turn smartphones out by the tens of millions in the blink of an eye while Apple goes at a snail's pace.

Samsung is way above Apple now and Wall Street loves to see Samsung kicking Apple's butt. Apple is as good as done for, no matter how much money it's making. Wall Street is already writing the company's epitaph, starting today. Apple's P/E is heading for 10 after earnings call.

JANUARY 14, 2013 2:22 P.M.

StonehamMel wrote:

I wish the bull analysts would STOP introducing concepts like improving yields and that they might reflect potentially greater AAPL profits into this discussion of supposed reduced demand for iPhones.

Like the Romney claims that Chrysler was moving Jeep production to China, or like Cramer saying that his daughter's friends were all hot on the Microsoft Surface, bear assertions on AAPL are necessarily a fact-free/aspiration-discouraging zone. To understand them, you have to start with the presupposition that saying something outrageous will get you visibility, and that visibility, not clarity, is the end game.

Or maybe their objective is to piss off the ghost of Steve Jobs enough to get him to rise up out of his grave and give them an acerbic tongue lashing.

JANUARY 14, 2013 2:30 P.M.

Mr. SameOldSameOld wrote:

Haha. The more analysts rush to defend Apple, the faster it goes down. I'll bet they're shorting it every time they pump it. The stupid individual investors run in to buy and the hedge funds suck it right back out. The hedge funds have their own agendas and Apple isn't part of it. It's easier to move cheap stocks up than larger ones like Apple. Nobody cares about Apple anymore. If it goes down the toilet, Wall Street is happy to oblige. iOS is practically dead. Google is just killing Apple despite having a much higher share price. Apple shareholders must be weeping like babies about now. Android is the favored OS and Samsung is the favored vendor. Just like Chris, everyone hates Apple. I don't care how much Apple sells or makes on earnings, the Wall Street buzzards are going to suck Apple dry just on general principle. It's a done deal.

JANUARY 14, 2013 2:30 P.M.

StonehamMel wrote:

Jake in Seoul: If you're truly in Seoul, you know just how jingoistic the tech press is there. There is no future for a journalist saying nice things about AAPL. Conversely, there is no longer a future for analysts saying positive things about AAPL ***anywhere" in the world.

Longs should just watch this all with a sense of humor. This is a phase, not an epitaph. Markets, like people, tend to behave rationally - but only after they exhaust the alternatives. Only politicians violate that principle.

JANUARY 14, 2013 2:46 P.M.

These analysts and the papers need to be held accountable!!! wrote:

If the SEC doesn't do something or the WSJ doesn't retract story and apoligize then Apple should just cut the WSJ off from all of their media events and product releases.

JANUARY 14, 2013 2:51 P.M.

Anonymous wrote:

@Beltway Greg "According to him that number they had planned to order was 65M. That’s ridiculous"

Same display is used in the iPod touch. How is it ridiculous?

JANUARY 14, 2013 3:25 P.M.

quicksand wrote:

I can explain and fix this for you guys at the same time!
I bought AAPL shares so the price then went down hard.
All I have to do is sell what I have and the price will rebound nicely and quickly.
But I am not selling so dig in for a very long and depressing ride!

JANUARY 14, 2013 3:37 P.M.

Rick wrote:

Juro will be arrested soon for taking cash to
write this story. Have fun with the lawsuits
WSJ.

JANUARY 14, 2013 3:54 P.M.

Paulo Lin wrote:

As I’ve been saying since they announced the iPhone 5, “Been there done that”! Apple has just launched another iphone with barely anything to speak of except for a 4” screen, barely thinner and lighter. The rest of it is nothing special. The Samsung Galaxy S3 which came out 4 months before the iPhone 5 was rated #1 phone of the year by CNET. Apple is no longer innovative and people are buying other better products for a lot less. Yes, Apple’s profit margins are an exaggeration of reality and that’s another reason why the iphone 5 sales are down. Give me a break $1000+ for an iphone 5 with 32 GB, what a joke! Until Apple realizes that they can’t rip off people anymore with ridiculous prices for an average product will people start buying more Apple products. Yes, they may have to cut into their exaggerated profits and come out with something better, not the iPhone 5 and iOS6 with a failed map application.

JANUARY 14, 2013 3:54 P.M.

Sal wrote:

The reason this BS continues daily on
Apple is that Apple is run by a bunch of
Pussies. Hey Tim, bend over some more
for us you pansie

JANUARY 14, 2013 4:30 P.M.

Lady in Red wrote:

Anyone see the article on PFhub? Why does the SEC continue to let this happen?

JANUARY 14, 2013 4:36 P.M.

Sid wrote:

Correction in the article: the stock price is down 3.5% not 6%.

C'mon, at least get the math right.

JANUARY 14, 2013 4:40 P.M.

T Buckle wrote:

$18.55 is a roughly 3.5% fall for Apple - not 6% #mathnoob

JANUARY 14, 2013 4:40 P.M.

Tiernan Ray wrote:

Sid: Indeed. Thank you for pointing out the error.

JANUARY 14, 2013 4:54 P.M.

Yawn wrote:

WSJ and Barrons. Who''s more Pathetic and on the Take??

JANUARY 14, 2013 4:55 P.M.

InvestorGater wrote:

Duh. OPTIONS EXPIRE on Friday.

What a COINCIDENCE.

JANUARY 14, 2013 5:00 P.M.

Sal wrote:

SEC is full of Jerk offs, otherwise this BS would be caught and the A hole writer thrown in jail.

It is truly sad that shareholders of Apple have to depend on Apple Management and Apple's Board ( both which have their heads up their as_) to do something to save the bleeding. Sux to be an Apple shareholder with these A holes having a circle jerk every day.

JANUARY 14, 2013 5:27 P.M.

Mark wrote:

I don't put much faith in the accuracy of this report. And the stock is cheap on a valuation basis regardless. But its multi-year uptrend has clearly and convincingly been broken. That alone is cause for caution. Unfortunately when Wall Street decides to abandon a stock this popular, fundamentals often go out the window.

JANUARY 14, 2013 10:01 P.M.

Jake_in_Seoul wrote:

@StonehamMel Well put indeed. Yes, jingoistic pretty much covers it concerning the South Korean press, although on occasion some reporters manage to sneak in heretical praise of Apple products, and now that Jobs is safely dead it's permissible to praise him. What keep keeps me sane while reading the tech articles on Naver.com are the comments, many quite delightfully to the point in their rudeness concerning Samsung et al. I'm also grateful to my extended acquaintance with conglomerate press tactics in Korea, as it makes spotting them in Europe and North America near effortless. The vast majority of tech journalists are now likely on the take, in one way or another.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.